In a parliamentary economy debate, Murdo Fraser warned the SNP government that setting tax rates too high would deter potential investors. 

Mr Fraser said: “It is essential that it gets [tax rates] right, because if we set tax rates too high and send out a message that Scotland is an uncompetitive place in the United Kingdom in which to invest in, set up or grow a business, we risk driving away the very entrepreneurs and wealth creators whom we need to attract, and we will end up with less money coming in for public services as a result.”

The warnings follow the approval of the Scotland Act 2016 in March, which granted the Scottish Parliament the right to set its own rates of income tax.

Mr Fraser warned that high tax rates had already caused a lack of market activity for larger properties over £0.5m.

He added: “Even a minor tweak could end the stagnation and bring in more much-needed tax revenue and at the same time help to rejuvenate the market at the top end and drive the economy as a result.”

The LBTT replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1st April 2015, and represents a charge more proportionate to the price of the property.

Properties of up to £145,000 pay 0% tax, with prices rising incrementally to a maximum charge of 12% for those over £750,000.